Wipro Q3 net profit flat at Rs 2,969 cr YoY, up 1.3% sequentially

Revenue for the quarter at Rs 20,311 crore was up 29.6 per cent YoY and and 3.3 per cent sequentially

The consolidated net profit of IT services major Wipro was flat year-or-year (y-o-y) at Rs 2,969 crore for the December (Q3FY22) quarter. The bottomline grew 1.3 per cent on a sequential basis and was marginally lower than the street estimates. 

The muted net profit performance was on account of weak operating performance and lower other income. While operating profit margins were down 410 basis points y-o-y to 17.6 per cent in the core IT vertical, fall in other income was on account of buyback post-Q3, FY21.

Aided by growth across most key segments, consolidated revenues was up 29.6 per cent y-o-y and 3.3 per cent to Rs 20,314 crore. For the IT segment, while reported sequential growth was 2.3 per cent, on a constant currency basis, the company posted a 3 per cent growth. This was lower than the consensus estimates that had pegged the growth at 4 per cent. 

In dollar terms, q-o-q growth was led by the consumer vertical which was 4.7 per cent while banking, financial services and insurance or BFSI vertical grew 3.5 per cent. The two together account for half of the overall revenues for the company. 

Commenting on the results, Thierry Delaporte, CEO and managing director, said this was the fifth consecutive quarter of strong performance, both on revenues, and margins. Our strategy and improved execution continue to serve us well, and we are confident of building on this momentum, he added. 

The street, however, was disappointed. Analysts at Prabhudas Lilladher said Wipro delivered a miss on revenues after four quarters of outperformance. Revenue decline, according to the brokerage, was on account of Energy & Utility vertical. This segment is its fourth largest accounting for 11.7 per cent of its revenues; its share of revenues was down 60 basis points on a sequential basis. The company, however, indicated that a large project in this segment had come to an end and was not replenished; the pipeline in this segment remains strong. Technology segment, too, was tepid and reported flattish performance due to furloughs (holidays).

While Q3 revenues were below par, the company indicated that order bookings continue to be robust. The company added seven new customers in the $100-million revenue bucket. Wipro closed the quarter with 11 large deals resulting in a total contract value of $600 million. The order book has seen a growth of 27 per cent y-o-y. 

In addition to the order book, the margin movement will be the other key area to watch out for. The IT services operating profit margin stood at 17.6 per cent, a fall of 19 basis points on a sequential basis. Salary hikes in September, the second in this financial year and increased hiring led to the pressure on margins. Over the next few quarters, the margin band could be in the 17-17.5 per cent range as the company prioritises on revenue growth, focuses on retaining and hiring talent and executes on delivery commitments, according to Jatin Dalal, chief financial officer at Wipro. 

The company has guided for sequential revenue growth of 2-4 per cent in the March quarter (Q4, FY22). 

The results were announced post market hours on Wednesday. However, Wipro's ADR (American Depository Receipt) was down 7.7 per cent (at 8.45 pm India time) in early trade on the NYSE.